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Saturday, July 07, 2012

India’s Informal Economy and Foreign Investment

In India, growth in informal sector is much higherAmanpreet Singh Chhina06 July 2012

Oxford:
Depreciating value of Indian rupee has raised enthusiasm among foreign
investors/NRIs to invest in India; however, without seriously analysing
the fact that 80 percent businesses in India are based in informal
economy and huge amount of black money is involved in the real estate
and private sector. Generally, the purchase of any property in India
involves 60 to 70 percent of black money and therefore the seller faces
many obstacles to bring that investment back to the foreign country.
“Many foreign investors are facing money laundering inquires by the
investigating officers in foreign countries” said Makhan Singh (NRI),
Solicitor Advocate of England and Wales.
In India, growth in
informal sector is much higher than formal sector and even the Prime
Minister of India is not sure about the actual GDP of the country. It is
estimated that illegal transactions in the property sector alone
generate about Rs. 2,000 crores of black money in a year in India,
assuming that there are about fifty lakh transactions in urban property
every year. Necessary steps should be taken by the Government of India
to match government value of the property with fair market value to
clamp down black money and money laundering in the country. It must be
remembered that a simple ‘Welcome Back’ slogan by the Prime Minister of
India will not attract back Indian professionals and investors unless a
corruption free infrastructure and business environment (single-window
clearance) is provided. GOI should develop policies to combat money
laundering and black money issues so that foreign investor or NRI’s can
invest in India.

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